NU SKIN CHIEF DEFENDS FIRM ON `NIGHTLINE'

By Max B. Knudson, Business Editor

Published: Thursday, July 25 1991 12:00 a.m. MDT

Embattled Nu Skin International Inc., the Provo-based multilevel marketing firm that has been the recent subject of national media scrutiny - including negative pieces in Newsweek and on television's Nightline - announced Thursday it is time to "answer critics who are presenting incorrect and misleading information about the company to the American public."

Blake Roney, president of Nu Skin, which distributes personal care products through what it terms "network" marketing but which is more commonly known as "multilevel" marketing, said his decision to speak out stemmed from last Friday's Nightline news program on ABC on which Michigan attorney general Frank Kelley accused Nu Skin of operating a "pyramid scheme."A pyramid scheme, in which the recruiting of salespeople, not the sale of a product, is the way that cash is generated, usually makes money only for those at the top of the "pyramid" at the expense of those who climb on later.

The July 22 issue of Newsweek titled "A Slippery Pyramid. To some, Nu Skin may be New Scam" says officials are trying to determine whether Nu Skin's independent distributors engage in illegal pyramid activities or whether its multilevel marketing plan is legitimate.

Roney denies Nu Skin is a pyramid scheme, saying it operates in the same manner as other multilevel distributors - including the giant Amway which is based in Kelley's home state of Michigan.

"A pyramid scheme is clearly different from network marketing . . . ," said Roney. "Network marketing is a dynamic, modern marketing method for getting products to the consumer. All income is generated from the sale of products . . . We are no different than Avon, Amway, Mary Kay, MCI, U.S. Sprint or any other company that works as we do."

During the Nightline segment, with guest host Barbara Walters substituting for Ted Koppel, Kelley supported his argument by pointing out that Nu Skin does not advertise its products. Roney counters that there is nothing unusual about that for a network marketing company.

"Network marketing relies on word-of-mouth and repeat customers for sales and high-profile exposure."

Roney said no one has ever said that Nu Skin products are "anything but excellent," and are "the prime cause of the company's phenomenal growth and prolonged success." He said corporate sales at Nu Skin have soared from $40 million in 1989 to $230 million last year while its employment has grown to 2,250 in the company's corporate offices and distribution facilities.

Roney acknowledged that the company's success depends on the network, but he stressed that no one is paid for signing up. "Distributors are only rewarded when products are sold."